By Olivier Dellacherie, Executive Chairman, Talent4Boards Inc.
This is the central question posed to the Board of Directors of Pharmaceutical leader Novartis and its president, Daniel Vasella, who was retiring today after the General Meeting, initially with a check of about 1 million dollars per month for the next 6 years (72MCHF – 80M$), before the cancellation of the decision under pressure from major shareholders and the public.
No need to remind you that Novartis has been at the top of European listed companies over the years in terms of remuneration of its CEO and chairman, Daniel Vasella, who had been CEO for 14 years (1996 to 2010) and chairman of the Board for 14 years (1999 to 2013), and has, therefore, become a wealthy guy during his career at Novartis.
But my question is not about the remuneration itself; he was a talented CEO at Novartis, and later also as chairman, and has created value for the company and its shareholders. My question is how the members of the Board of Directors, and before that, the members of the Remuneration Committee, have managed to make this decision. Yes, the decision complied with the Swiss Code of Corporate Governance, so there is no requirement to explain it. However, I consider that if we cannot explain a decision, it should be canceled or better, never even proposed to the vote. In any case, “announce” does not mean “explain.”
Having been in charge of compensation committees in Small/Mid-caps listed companies, I always checked with my fellows, if we were able to explain our decisions to the Board of directors, to the Executive committee, and even more to the shareholders. No matter what the decision is, also if it is considered controversial, the Board of Directors and its remuneration committee should be able to explain it factually, and believe in their decision. There is no need to say that to be confronted by shareholders in a General Meeting might indeed decrease the ambition of some Board members.
In this story, explain that after 17 years’ service for a company, and having been compensated in the top-tear over that period, the retiring Chairman (60) could decide to compete with his former group and that the company and its shareholders need to pay 80M$ to avoid, was a tricky task if not impossible.
“If you cannot explain, better to cancel.”
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